WASHINGTON, Oct. 16, 2012 —
/PRNewswire/ -- Venable LLP has obtained an important victory for the Republic
of Paraguay in an international arbitration before a three-person tribunal of
the International Centre for Settlement of Investment Disputes
("ICSID") in Washington, DC. The case is Bureau Veritas,
Inspection, Valuation, Assessment and Control, BIVAC B.V. v. The Republic of
Paraguay.
The Venable
team was led by Brian Dunning, from Venable's New York office, and included
associates Irene Ribeiro Gee and David Cinotti.
The matter
concerned an agreement between BIVAC, a Dutch company, and Paraguay. In 1996,
Paraguay hired BIVAC to inspect goods that were being exported from foreign
countries to Paraguay. Paraguay and BIVAC signed a contract. In July 1999, the
parties agreed to terminate the contract and end the inspections. BIVAC claims
that Paraguay owed it approximately $22,000,000 at the time of termination,
plus interest accruing from 1997.
In 2007, BIVAC
claimed that commenced arbitration against Paraguay before ICSID. BIVAC argued
that by failing to pay BIVAC under the contract, Paraguay was in breach of
international legal obligations found in the bilateral investment treaty (BIT)
between the Netherlands and Paraguay.
Specifically,
BIVAC claimed that Paraguay breached provisions of the BIT requiring it to (i)
observe its obligations forward BIVAC's investment (under what is known as
"umbrella clause"); (ii) to treat BIVAC's investment fairly and
equitably; and (iii) not to expropriate investments without just compensation.
In an earlier
decision dated May 29, 2009, the Tribunal dismissed BIVAC's expropriation claim
and found that, while its umbrella clause claim was within its jurisdiction, it
was not admissible because the parties' contract required them to litigate
contract disputes in the courts of Asuncion, Paraguay. The tribunal found that
it had jurisdiction over, and admitted, BIVAC's claim for unfair, inequitable,
treatment of its investment. These claims were the subject of hearings in
Washington in July, 2011. BIVAC claimed total damages and interest of more than
$63,000,000.
On October 9,
2012, the Tribunal issued its "Further Decision on Objections to
Jurisdiction." In the Further Decision, the Tribunal found that Paraguay's
alleged failure to pay did not constitute unfair and inequitable treatment
under the bilateral investment treaty. The Tribunal concluded that BIVAC had
only alleged a contract dispute, while breach of treaty requires abuse of
sovereign authority in which Paraguay did not engage.
Commenting on
the decision, Brian Dunning, of Venable, said, "We are pleased that ICSID
rendered this positive decision. It reinforces the idea that, while important,
bilateral investment treaties have limitations, and should not be relied upon
to avoid contractual forum clauses."
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